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ECONOMIC ASSESSMENT OF 
WASHINGTON INITIATIVE 522 



PREPARED BY 

JOANNA M. SHEPHERD-BAILEY, PH.D. 
EMORY UNIVERSITY SCHOOL OF LAW 






alliance for ^^p° d5 ° 

natural health 

Commissioned by ANH-USA. 
For more information visit ANH-USA.ORG/GMO 



ECONOMIC ASSESSMENT OF 
WASHINGTON INITIATIVE 522 



PREPARED BY 
JOANNA M. SHEPHERD-BAILEY, PH.D. 
EMORY UNIVERSITY SCHOOL OF LAW 



EXECUTIVE SUMMARY 



This economic assessment addresses the question of three potential costs associated with 
Initiative 522: 

7. Relabeling expenses associated with the redesign of package labels and display 
of placards in grocery stores. My analysis indicates no change in consumer food 
prices as a result of these relabeling expenses. 

2. Costs resulting from possible litigation in the State of Washington. A miniscule 
increase in litigation is predicted to result from Initiative 522. 

3. Costs resulting from new regulations to be adopted by the Washington 
Department of Health. The increase in these administrative costs will be trivial. 



Food Producers Will Not Raise Prices to Offset the 
Expense of Relabeling 

Consumers will see no increase in prices as a result of the relabeling required by 
Initiative 522. Countless empirical studies and reports by government agencies establish 
the numerous reasons why food producers do not raise prices to offset the trifling expense 
of relabeling: 

• For many food producers, label changes required by Initiative 522 will be 
incorporated into regularly scheduled label redesigns. 

• Price adjustment expenses will deter food producers from raising prices to offset 
relabeling under Initiative 522. 

• As relabeling costs under Initiative 522 are a one-time expense rather than a 
permanent cost increase, sellers will not be willing to incur the expenses of re-pricing. 

• The fear of losing customers in the competitive food industry is an important 
deterrent to changing prices. 

Nevertheless, I compute an improbable, worst-case scenario: the consumer price 
increases that would result if all producers pass on, to consumers, the entirety of the minor, 
one-time expense of redesigning labels and installing store placards: 

• Prices for packaged products would increase by, on average, 0.14% for one year 
only, to offset the entire one-time expense of redesigning labels. 

• Produce prices would increase by 0.1%, for one year only, to account for the new 
expense of placards disclosing genetic engineering. 

• In summary, the improbable, worst-case scenario in Washington is that price 
increases as a result of Initiative 522 — across all products, for one year only — 

amount to a mere $2.20 per person. 



Trivial Costs Resulting from Increased Litigation 



If there is an increase in litigation associated with Initiative 522, the state could incur trivial 
costs to process and hear the additional cases. In addition, the attorney general and 
local district attorneys may also incur insignificant costs as they review and respond to 
allegations of violations and notices of private action. 

• The annual costs to the State of Washington for processing and hearing additional 
cases under Initiative 522 are expected to be less than $179,500 annually. 

• In per capita terms, an additional $179,500 translates into a cost of $0,026, or 
approximately 3 cents, for each person living in the State of Washington. 



Negligible Administrative Costs 

Initiative 522 may also impose administrative costs on the State of Washington as the 
Department of Health adopts regulations necessary to implement certain provisions in the 
measure. 

• These additional annual administrative costs are projected to be approximately 
$741,000. 

• Costs of $741,000 represent only 0.156% of the Department of Health Budget and 
0.0045% of the entire state budget. 

• In per capita terms, an additional $741,000 translates into a cost of $0,104, or 
approximately 10 cents, for each person living in the State of Washington. 



CONTENTS 



I. Food Producers Will Not Raise Prices in Response to Labeling Requirements 

A. For most food producers, label changes required by Initiative 522 will be 
incorporated into regularly scheduled label redesigns. 

B. For those food producers that may incur labeling expenses as a result of Initiative 
522, barriers to price adjustments exist that will deter them from passing costs 
onto consumers. 

7. Price-adjustment costs will deter food producers from raising prices to 
offset the trivial expense of relabeling under Initiative 522. 

2. As relabeling costs under Initiative 522 are a one-time expense rather 
than a permanent cost increase, sellers will not be willing to incur the 
repercussions of re-pricing. 

3. The fear of losing customers in the competitive food industry is an 
important deterrent to changing prices. 

D. Worst case scenario: negligible increase in consumer prices from labeling. 

7. Estimate of negligible labeling expenses 

2. Estimate of minor expense to place placards in stores 

3. Worst case scenario: trivial increase in consumer prices 

II. The Minor Costs of Possible Litigation 

E. Costs of Attorney General litigation 

H. Costs of private litigation 

I. Total costs of increases in litigation 

III. Negligible Administrative Costs 



ECONOMIC ASSESSMENT OF 
WASHINGTON INITIATIVE 522 



l. Food Producers Will Not Raise Prices to Offset the 
Expense of Relabeling 

Initiative 522 requires producers of certain foods offered for retail sale in Washington to 
alter their package labeling or display placards to disclose genetic engineering: 

Sec. 3. (1) Beginning July 1, 2015, any food offered for retail sale in Washington 
is misbranded if it is, or may have been, entirely or partly produced with genetic 
engineering and that fact is not disclosed as follows: 

(a) In the case of a raw agricultural commodity, on the package offered for retail sale, 
with the words "genetically engineered" stated clearly and conspicuously on the front 
of the package of such a commodity, or in the case of such a commodity that is not 
separately packaged or labeled, on a label appearing on the retail store shelf or bin 
where such a commodity is displayed for sale; 

(b) In the case of any processed food, on the front of the package of such food 
produced by a manufacturer, with the words "partially produced with genetic 
engineering" or "may be partially produced with genetic engineering" stated clearly 
and conspicuously.^ 

Thus, Initiative 522 will cause some food producers to incur negligible expenses to redesign 
package labels and display placards in grocery stores. However, food producers will not 
raise prices to offset the expense of relabeling for 2 reasons: 1) food producers routinely 
redesign and reprint labels. So, the wording required under Initiative 522 can be easily 
incorporated into one of these planned redesigns at zero additional cost and 2) food 
producers will not raise prices to offset the negligible expense of relabeling due to price 
adjustment costs and competitive pressures. 

Below, I discuss the empirical evidence validating why food suppliers will not change prices 
at all to offset inconsequential labeling expenses imposed by Initiative 522. I then address 
the worst-case scenario: the price increases that would result if all producers pass on the 
entire one-time expense of redesigning labels and installing store placards to consumers. 



1 INITIATIVE MEASURE NO. 522 Section 3 (a). 

1 



A. For many food producers, label changes required by Initiative 522 can be 
incorporated into regularly scheduled label redesigns. 

Food manufacturers change labels at regular intervals, allowing them to incorporate 
regulatory changes into planned changes. The Food and Drug Administration has 
developed a Labeling Cost Model that is used to estimate the impact of regulatory labeling 
changes. The Model indicates that 75 percent of food product labels undergo at least one 
routine label change every 30 months, and many food products will undergo numerous 
planned changes during that time. 2 

The compliance period for Initiative 522 is 20 months: 

Sec. 3. (1) Beginning July 1, 2015, any food offered for retail sale in Washington 
is misbranded if it is, or may have been, entirely or partly produced with genetic 
engineering and that fact is not disclosed as follows: 3 

Thus, assuming the routine label changes are linear over time in the FDA Model, at least 
50 percent of the food products requiring labeling changes will be scheduled to undergo 
routine label changes during the 20-month compliance period. During these routine 
changes, the food producers can easily, and at no marginal cost, add the language required 
under Initiative 522. Thus, for at least half of the food products requiring label changes 
under Initiative 522, the changes can be made during routine label redesigns, costing the 
food producers nothing. 



B. For those food producers that may incur labeling expenses as a result of Initiative 
522, barriers to price adjustments exist that will deter them from passing costs 
onto consumers. 

Food producers that are unable to add the disclosure of genetic engineering as part of a 
routine label change will incur certain costs as they redesign products' packaging labels. 
However, as I discuss in the following sections, the expense of relabeling and placards that 
disclose genetic engineering represent a trivial cost for both food manufacturers and food 
retail stores. Food manufacturers' average one-time expense to redesign labels — $1,104.43 
per product — represents only 0.14% of the estimated annual per-product sales of $773,063. 
Similarly, the $2,820 expense of placards represents 0.1% of the average annual per- 
store produce sales of $2,733,275 and 0.01% of average supermarket annual sales of 
$25,237,992. 

Because food sellers incur costs every time they change prices, many food sellers will 
refrain from changing prices to pass on the labeling expenses imposed by Initiative 522. 
Based on the estimates of relabeling expenses computed in the following sections, there 
are three reasons why relabeling expenses under Initiative 522 will not justify the cost of 
re-pricing for many food sellers: (1) relabeling expenses will represent a trivial cost for 
most sellers, (2) relabeling expenses are a one-time expense rather than a permanent cost 
increase, and (3) in the rare occasion when relabeling expenses do justify a price increase, 
competitive pressures will deter many food sellers from changing prices. 



2 Food and Drug Administration, Food Labeling: Trans Fatty Acids in Nutrition Labeling, Nutrient Content 
Claims, and Health Claims, 68 Federal Register 41477 (2003). 

3 INITIATIVE MEASURE NO. 522 Section 3 (a). 



2 



7. Price-adjustment costs will deter many food producers from raising prices to offset 
the trivial expense of relabeling under Initiative 522. 

Changing food prices in supermarkets is "a complex process, requiring dozens of steps and 
a nontrivial amount of resources." 4 The literature has established two primary categories 
of price adjustment costs that are relevant for food products: the physical cost of price 
changes and the management costs of price changes. The physical costs of re-pricing are 
referred to in the economic literature as "menu costs" and they include "(1) the labor cost 
of changing shelf prices, (2) the costs of printing and delivering new price tags, (2) the costs 
of mistakes made during the price change process, and (4) the cost of in-store supervision 
of the price change process." 5 Measurements of menu costs conclude that the per-product/ 
per-store cost of price changes averages $0.52 per price change. 6 

Other studies have focused on price adjustment costs other than the physical costs of 
changing prices. Several studies have compiled interview data with corporate price setters 
and established that management costs are also a significant cost of price adjustments. 7 
These management costs include the time and attention required of managers to gather 
the relevant information and to make and implement price-adjustment decisions. For 
example, they find that price adjustments require a great deal of information gathering 
of customer, company, and competitor data. Then, various organizational members, 
potentially including members from the sales, marketing, and finance departments, spend 
time either making price change decisions or executing these decisions. Ultimately, these 
studies find that management costs represent a nontrivial cost of price adjustments. In 
fact, their data suggest that the management costs of price changes are greater than the 
physical costs, or menu costs, of price changes. Moreover, confirming the importance of 
management costs in limiting price changes, other empirical studies show that even when 
the physical cost of changing prices is zero, firms often refrain from making price changes. 8 

A substantial body of literature has established that sellers change prices in response 
to cost increases only if the "desired adjustment is large enough to warrant paying the 
menu cost. That is, firms respond to large [cost] shocks but not to small [cost] shocks." 9 
As I discuss in the following sections, the expense of relabeling and placards that disclose 
genetic engineering represent a trivial cost for food manufacturers and food retail stores. 
Thus, the cost of physically changing product prices will deter many food producers from 
passing on the labeling expenses imposed by Initiative 522. 10 



4 Daniel Levy, Mark Bergen, Shantanu Dutta, & Robert Venable, The Magnitude of Menu Costs: Direct Evidence 
from Large U.S. Supermarket Chains, 1 12 Quarterly Journal of Economics 791, 792 (1997). 

5 Id. 

6 Id. at 793. 

7 M. Zbaracki, et al., Managerial and customer costs of price adjustment: direct evidence from industrial 
markets, 86 Review of Economics and Statistics 514 (2004); M. Zbaracki, M Bergen & D. Levy, The anatomy of a price 
cut: discovering organizational sources of the costs of price adjustment, Working Paper, Bar-Han University and Emory 
University (2006); AS Blinder, Why are prices sticky? Preliminary results from an interview study, 81 American Economic 
Review 89 (1991); AS Blinder, et al., Asking About Prices: A New Approach to Understanding Price Stickiness (1998). 

8 R. Chakrabarti & Scholnick B., The mechanics of price adjustment: new evidence on the (un)importance of 
menu costs, 28 Managerial and Decision Economics 657 (2007). 

9 See, e.g., Laurence Ball & N. Gregory Mankiw, Relative Price Changes as Aggregate Supply Shocks, 1 10 

Quarterly Journal of Economics 161, 162 (1995). 

1 Arthur Fishman & Avi Simhon, Can small menu costs explain sticky prices?, 87 Economic Letters 227 (2005) 



3 



2. Relabeling expenses under Initiative 522 are a one-time, rather than a permanent, 
cost increase, and many sellers will not be willing to incur the repercussions of re- 
pricing to offset a trivial, one-time expense. 

In addition, the relabeling and placard expenses are one-time expenses that food 
producers and retail food stores will bear only once to meet the requirements of Initiative 
522. Existing literature on food prices reveals that while retail prices may adjust to reflect 
permanent changes in costs, there is often no change in retail prices following such 
temporary changes in expenses. 11 The studies conclude that it is often not in sellers' 
best interest to change prices in response to a temporary expense because of the menu 
costs of changing prices and the risk of losing customers who think price changes are 
permanent. 12 Moreover, in the highly competitive food industry, economic theory predicts 
that permanently higher prices that do not offset permanently higher expenses are an 
unsustainable strategy for firms that wish to remain competitive. Thus, firms would have to 
raise, and then lower, consumer prices in response to a one-time price increase. The menu 
costs associated with these two price changes are certainly too high to justify changing 
many consumer prices to offset the expense of relabeling or placards. 

The fear of losing customers in the competitive food industry is an important deterrent to 
changing prices. 

Moreover, if even a few food suppliers refrain from passing on the one-time expense of 
relabeling, many competitors will also be deterred from passing on the expenses. In the 
competitive food retail industry, price increases in one product can cause many consumers 
to substitute away from the newly priced product to similar products that have not 
experienced price increases. Thus, even for firms that may otherwise increase prices to pass 
on the trivial expense of relabeling, competitive pressures may deter them from doing so. 

Indeed, several recent empirical papers show that the desire to keep current customers 
is an important factor in food suppliers not raising prices to pass on costs. 13 The studies 
show that firms' price changing decisions are dynamic in the sense that they care not only 
about costs and revenues in the current period, but also in future periods. As a result, 
firms are less likely to change current prices when doing so may result in losing sales as 
customers switch to a competing product. The studies find that this resistance is especially 
strong when cost increases are temporary, like the possible one-time relabeling expense 
imposed by Initiative 522. Moreover, survey research confirms that a primary reason 
firms don't change prices in response to many cost changes is because of the fear of 
losing customers. 14 The findings of these empirical studies have important implications for 
Initiative 522: even if relabeling expenses are substantial enough to justify the cost of re- 
pricing, many suppliers will refrain from changing prices from fear of losing customers to 
other products that have not increased prices. 



1 1 Daniel Levy, Shantanu Dutta & Mark Bergen, Heterogeneity in Price Rigidity: Evidence from a Cast Study Using 
Microlevel Data, 34 Journal of Money, Credit, and Banking (2002); 

12 See, e.g. Dennis Carlton, The Theory and the Facts of How Markets Clear: Is Industrial Organization Valuable 
for Understanding Macroeconomics?" in 1 Handbook of Industrial Organization, 909 (Richard Schmalensee and Robert D. 
Willig, eds; 1989). 

13 Isaac Kleshchelski & Nicolas Vincent, Market share and price rigidity, 56 Journal of Monetary Economics 344 
(2009); Martin Uribe, Morten Ravn, and Stephanie Schmitt-Grohe, Incomplete Cost Pass-Through Under Deep Habits, 

National Bureau of Economic Research Paper # 12961 (2007), available at: http://www.nber.org/papers/w12961 

14 A. S. Blinder, et al., Asking about Prices: A New Approach to Understanding Price Stickiness (1998). S. Fabiani et al., 
What Firms' Surveys Tell Us about Price-Setting Behavior in the Euro Area, 2 International Journal of Central Banking 
(2006). 



4 



C. Worst-case scenario: Trivial increase in consumer prices from labeling 

As a result of the required genetic engineering disclosure, some food producers will incur 
minor expenses to redesign package labels and display placards in grocery stores. As 
previously discussed, most food producers will not increase consumer prices to offset this 
one-time, minor expense. However, this section estimates the worst-case scenario: the 
price increases that would result if all producers pass on the entire one-time expense of 
redesigning labels and installing store placards. As I show, prices for packaged products 
would only have to increase by, on average, 0.14% to offset the entire one-time expense 
of redesigning labels. Similarly, produce prices would have to increase by only 0.1% to 
account for the new expense of placards disclosing genetic engineering. Thus, in the 
veryunlikely event of a price increase resulting from Initiative 522, the average individual in 
Washington would spend an extra $2.20 across all products, in one year only. 

7. Estimate of negligible labeling expenses 

Food producers that are unable to add the disclosure of genetic engineering as part 
of a routine label change will incur certain one-time costs as they redesign product 
packaging labels. To estimate the average increase in labeling expenses, I use the Food 
and Drug Administration's (FDA) estimated cost of label changes following new regulatory 
requirements. Then I compare the additional labeling expense for each unique product to 
the average annual per-product sales in Washington to compute the percentage increase 
in sales revenue required to offset the new labeling expense. Assuming constant consumer 
demand, I estimate average price increases required to achieve this increase in sales 
revenue. 

FDA has estimated the costs of one-time alterations to package labels in its required 
Regulatory Impact Analyses for various regulations. 15 FDA uses a Labeling Cost Model to 
calculate the cost of a new label based on the product type, label type, type of analytical 
and market tests necessary to develop the new label, compliance time, and inflation. 16 
Included in their estimated costs of relabeling are administrative, graphic design, pre-press 
preparation, printing and engraving, and the lost inventory value of discarded labels. 17 
FDA's estimates recognize that the costs of changing labels vary across products because 
different packaging converters and food manufacturers have different packaging costs. 

In addition, the estimates reflect that the cost of redesigning labels decreases as the length 
of the compliance period increases. Manufacturers change labels or, at least, reorder them 
at regular intervals. For example, FDA has estimated that three-quarters of package labels 
are normally scheduled to be changed during any 30-month period. 18 A longer compliance 
period allows manufacturers to incorporate new regulatory requirements into scheduled 
label changes. As a result, labels can be altered to reflect new requirements at little 
additional cost. 



15 Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, 
when regulation is necessary, to select regulatory approaches that maximize net benefits. 

16 Food and Drug Administration, Food Labeling: Health Claims; Soluble Fiber from Certain Foods and Risk of 
Coronary Heart Disease; Final Rule, 73 Federal Register 23952 (2008) 

1 7 Food and Drug Administration, Preliminary Regulatory Impact Analysis and Initial Regulatory Flexibility Analysis 
of the Proposed Rules to Ensure the Safety of Juice and Juice Products, 63 Federal Register 24274 (1998) 

18 Food and Drug Administration, Food Labeling: Trans Fatty Acids in Nutrition Labeling, Nutrient Content 
Claims, and Health Claims, 68 Federal Register 41477 (2003). 

5 



The compliance period of Initiative 522 is approximately 20 months (November, 2013 
to July, 2015). As reported in Table 1, FDA has estimated that the per-product cost of 
a label change is $1,903.38 for a one-year compliance period and $704.96 for a two- 
year compliance period. 19 The costs decrease over time to reflect the fact that many 
food producers will be able to redesign package labels to include genetic engineering 
disclosures as part of their regular, scheduled label changes. Thus, assuming the cost of a 
label change is linear over time, the average per-product cost of redesigning labels for a 
20-month compliance period would be $1,104.43, based on FDA estimates. 

Table 1: 



FDA Estimates of Label Change Costs per Product for 
Different Lengths of Compliance Period 20 





1 YEAR 


2 YEAR 


Administrative Costs 


$1268.92 


$634.46 


Redesign Costs 


$634.46 


$70.50 


Inventory Loss 


$0.00 


$0.00 


Total Cost 


$1,903.38 


$704.96 



Every year, the Food Marketing Institute (FMI) publishes an industry-wide report with 
detailed information on food retailer sales, operations, store-level benchmarks, and 
competitive issues. 21 The information is drawn from many sources including survey 
responses representing over 24,000 stores, performance data from stores, and annual 
reports for stockholders and 10-K reports filed with the Securities and Exchange 
Commission. 

The FMI reports store averages for various kinds of food retailers: conventional 
supermarkets, warehouse stores, super/combination stores, limited assortment stores, 
convenience stores, and niche/specialty stores. According to the 2010 FMI report, food 
retailers in the United States carry an average of 36,928 unique products. 22 The average 
product generates weekly sales of $12. 95, 23 or $673.40 per year. 



19 In 2012 dollars. The original estimates were reported in 1998 dollars (Food and Drug Administration, Preliminary 
Regulatory Impact Analysis and Initial Regulatory Flexibility Analysis of the Proposed Rules to Ensure the Safety of 
Juice and Juice Products, 63 Federal Register 24275 (1998)) I adjusted the estimates using the Bureau of Labor Statistics' 
Inflation Calculator available at: http://www.bls.gov/data/inflation_calculator.htm. Although these label change estimates 
are based on juice labels, they are similar to FDA's estimates for a wider range of products: "Across product categories, 
the average low relabeling cost per SKU is about $1,100 and the average high relabeling cost per SKU is $2,600." Food 
and Drug Administration, Food Labeling: Trans Fatty Acids in Nutrition Labeling, Nutrient Content Claims, and Health 
Claims, 68 Federal Register 41477 (2003). Thus, across a broader range of food products, average relabeling costs per 
product would be $1850. Although the per-product estimate I use is slightly lower, I assume that all food products will 
incur this relabeling cost. In contrast, in the Regulatory Impact Analysis in which FDA uses the average relabeling costs 
per product of $1850, FDA assumes that only 25% of products will incur this relabeling cost. Id. 

20 Id. 

21 Food Marketing Institute, The Food Retailing Industry Speaks (2010), available for purchase at: http://www.fmi.org/ 
forms/store/ProductFormPublic/search?action=1 &Product_productNumber=2318 

22 Id. at 86. I computed the overall average by weighting the average of each category of food retailer by the 
number of respondents in each category (bottom panel of Table 15) 

23 Id. at 33. 



6 



Most products are sold in numerous stores across Washington. Using data on Washington 
grocery stores and product availability, I estimate the annual sales in Washington of the 
average food product. 

In the most recent Economic Census, the U.S. Census Bureau reports that Washington is 
home to 2,029 grocery stores, which include conventional supermarkets and convenience 
stores that are primarily engaged in marketing food products. A recent report by the 
FTC Bureau of Economics uses weekly scanner data on 22,207 products and fourteen 
retailer-city combinations for a three-year period to estimate the product availability across 
different retailers. Based on these data, FTC estimates that the average food product is 
available in 56.6% of food retail stores. 24 Thus, the average food product in Washington 
would be available in 1,148 stores (56.6% of the 2,029 food retail stores). 

Based on these data, I compute a conservative estimate of the average annual sales per 
product in Washington. As the average food product generates annual sales of $673.40 
per store and is carried in 1,148 stores, then each product generates average annual sales 
of $773,063 across all grocery stores in Washington (1,148 stores * $673.40 per store). 
This estimate likely underestimates the average annual state-wide sales because it ignores 
sales in the other 3,570 non-grocery retailers that also sell food products in Washington: 
specialty food stores, beer, wine, or liquor stores that also sell groceries, general 
merchandise stores selling groceries, health and personal care stores that sell groceries, 
and gasoline stations that sell groceries. 25 

Nevertheless, the average one-time expense to redesign labels of $1,104.43 per product 
represents only 0.14% of the estimated annual per-product sales of $773,063. That is, if the 
average product generated approximately one-tenth of one percent more sales revenue in 
one year, this would completely offset the relabeling expense of $1,104.43. 

2. Estimate of minor expense to place placards in stores 

Initiative 522 may also require some food retailers to display placards disclosing genetic 
engineering for products that are not separately packaged: 

(a) In the case of a raw agricultural commodity, on the package offered for retail sale, 
with the words "genetically engineered" stated clearly and conspicuously on the front 
of the package of such a commodity, or in the case of such a commodity that is not 
separately packaged or labeled, on a label appearing on the retail store shelf or bin 
where such a commodity is displayed for sale; 26 

To estimate the average per-store expense of placards as producers disclose genetic 
engineering, I use the FDA's estimated placard costs to disclose certain warnings about 
minimally-processed juices. Then, I compare the average square footage devoted to 
minimally-processed juices to the average square footage devoted to fruits and vegetables 

24 I computed this average from Table 1 : using the midpoint of each range in the first column and the average in 
the last column. See Appendix 1 for the full table. Steven Tenn & John Yun, Biases in Demand Analysis Due to Variation 
in Retail Distribution, FTC Bureau of Economics Working Paper No. 287 at 27 (2007), available at: http://www.ftc.gov/be/ 
workpapers/wp287.pdf 

25 I exclude this data because the ACNielsen scanner data that the FTC uses to estimate product availability 
concentrates on grocery stores. See Appendix 2 for the number of establishments per retailer category. U.S. Census 
Bureau, Retail Trade: Subject Series — Product Lines: Product Lines Statistics by Kind of Business for the United States and 
States (2007), available at: http://factfinder2.census.gov/faces/nav/jsf/pages /searchresults. xhtml 

26 INITIATIVE MEASURE NO. 522 Section 3 (a). 



7 



in supermarkets. I assume that the number of required placards is a function of display 
area. I also assume that placards will be displayed throughout the produce section. This will 
necessarily overstate the true expense of placards because many supermarkets sell few or 
no genetically modified fruits and vegetables in their produce departments. Although FDA 
has approved production of genetically modified varieties of plums, cantaloupe, papaya, 
squash, radicchio, tomatoes, and potatoes, many of these varieties are difficult to produce 
under field conditions so they are never marketed in supermarkets. 27 

FDA has estimated the costs of placards in supermarkets as part of its Regulatory Impact 
Analyses for various regulations. FDA has recently estimated that the average per-store 
cost of placards displaying warning labels for minimally processed juices in supermarkets is 
$141. 28 This estimate includes both the cost of periodic replacement and the possibility that 
some stores may have to display multiple placards to meet the requirement that warnings 
be available at the point of purchase. 

The typical supermarket devotes approximately 150 square feet to minimally processed 
juices. 29 In contrast, the typical supermarket devotes 2831 square feet to the produce 
department. 30 Thus, in the average supermarket, the produce department is approximately 
20 times larger than the display of minimally processed juices. Assuming placards are 
displayed throughout the produce department and the number of required placards is a 
function of display area, then the average per-store expense of placards will be $2,820 
($141*20). However, this estimate is certain to be an overestimate of the actual per-store 
expense of placards because many stores sell few or no genetically modified fruits and 
vegetables in their produce section. 

If produce-item placards cost an additional $2,820 per store, this represents a trivial 
expense compared to the sales generated from the produce department in the average 
grocery store. The Food Marketing Institute reports that, in 2010, produce sales account 
for 10.83% of total supermarket sales 31 and the average supermarket had annual sales of 
$25, 237, 992. 32 Thus, annual produce sales are $2,733,275 at the average supermarket. As a 
result, the $2,820 expense of placards represents 0.1% of the average annual produce sales 
and 0.01% of average supermarket annual sales. 



27 Marion Nestle, Genetically Modified Foods in Supermarkets: How Many?, The Atlantic (Sep 24 2010), available 
at www.theatlantic.com/health/archive/2010/09/genetica I ly-mod if ied-foods-in-supermarkets-how-^ Peter 
Tyson, PBS, Harvest of Fear: Should We Grow Them, available at: http://www.pbs.org/wgbh/harvest/exist/. 

28 In 2012 dollars. The original estimates were presorted in 1998 dollars (Food and Drug Administration, 
Preliminary Regulatory Impact Analysis and Initial Regulatory Flexibility Analysis of the Proposed Rules to Ensure the 
Safety of Juice and Juice Products, 63 Federal Register 24274 (1998)) 

29 Display area is reported in linear feet. I assume the depth of a display area is 3 feet (likely an overestimate), so 
that square footage=linear feet*3. Edward W. McLaughlin & David M. Russo, Cornell Food Industry Management Program, 
Supermarket Dairy Department: An Overview of Operations and Performance 6 (1991), available at: http://dyson.cornell.edu/ 
outreach/extensionpdf/1 991/Cornell_AEM_eb91 1 8.pdf 

30 Debra Chanil & Meg Major, 207 7 Produce Operations Review, Progressive Grocer (October, 201 1), available at: 
http://www.progressivegrocer.com/inprint/article/id2272/picking-up-the-pace/ 

31 Food Marketing Institute, Supermarket Sales by Department (2010), available at: http://www.fmi.org/docs/facts- 
figures/grocerydept.pdf?sfvrsn=2. 

32 To compute the annual average, I multiplied the average weekly sales by 52. Food Marketing Institute, The 
Food Retailing Industry Speaks 23 (2010), available for purchase at: http://www.fmi.org/forms/store/ProductFormPublic/ 
search?action=1 &Product_productNumber=23 1 8 



8 



3. Worst-case scenario: trivial increase in consumer prices 



Thus, the average expense of redesigning labels is estimated to be $1,104.43 per product 
and the average expense of displaying placards disclosing genetic engineering will be less 
than $2,820 per store. In this section, I estimate the worst-case scenario: the price increases 
that would result if all producers pass on, to consumers, the entire one-time expense of 
redesigning labels and installing store placards. 

The Consumer Expenditure Survey is a Federal survey that provides information on the 
complete range of consumers' expenditures and incomes, as well as the characteristics of 
those consumers. 33 The survey data are collected for the Bureau of Labor Statistics by the 
U.S. Census Bureau. It is used by economic policymakers examining the impact of policy 
changes on economic groups, by businesses and academic researchers studying consumers' 
spending habits and trends, by other Federal agencies, and, to regularly revise the 
Consumer Price Index market basket of goods and services and their relative importance. 

From the 2012 Consumer Expenditure Survey (the most recent year with state-specific 
data available), I computed the average annual food expenditures by consumer unit, or 
household, in Washington. 34 Table 2 reports the results. 

Many categories of food will be exempt from labeling under Initiative 522. For example, 
under the Initiative, the entire categories of meat, other animal products such as eggs and 
milk, and alcoholic beverages are exempt from labeling: 

(3) Subsection (1) of this section does not apply to any of the following: 

(a) Food consisting entirely of, or derived entirely from, an animal that has not itself 
been genetically engineered, regardless of whether the animal has been fed or injected 
with any food produced with genetic engineering or any drug that has been produced 
through means of genetic engineering; 

(b) A raw agricultural commodity or food that has been grown, raised, produced, 
or derived without the knowing and intentional use of genetically engineered seed 
or food. To be included within the exclusion under this subsection, the person 
supplying a raw agricultural commodity or food must provide a sworn statement that 
the rawagricultural commodity or food: (i) Has not been knowingly or intentionally 
produced through genetic engineering; and (ii) has been segregated from, and has not 
been knowingly or intentionally commingled with, foods that may have been genetically 
engineered at any time. In providing such a sworn statement, a person may rely on a 
sworn statement from his or her own supplier that contains such an affirmation; 

(d) Any alcoholic beverage that is subject to regulation under Title 66 RCW; 35 



33 Bureau of Labor Statistics, Consumer Expenditure Survey (public-use micro data, 2012) available at: http://www.bls. 
gov/cex/home.htm 

34 A consumer unit is defined as members of a household related by blood, marriage, adoption, or other legal 
arrangement; a single person living alone or sharing a household with others but who is financially independent; or two 
or more persons living together who share responsibility for at least 2 out of 3 major types of expenses - food, housing, 
and other expenses. The terms household or consumer unit are used interchangeably for convenience. In Washington, 
the average consumer unit taking part in the Consumer Expenditure Survey is composed of 2.31 people. 

35 INITIATIVE MEASURE NO. 522 Section 3 (3a), (3b), (3d) 

9 



Table 2: 



Average Annual Food Expenditures by Household: 
U.S. Census Bureau Consumer Expenditure Survey, 2012 





Washington 


Food 


d*~7 A A ~7 

$7,147 


Food at home 


&" A ~7 A C 

$4,715 


Cereals and bakery products 


d* Z. A o 

$642 


Cereals and cereal products 


$219 


Bakery products 


$423 


Meats, poultry, fish, and eggs 


$930 


Beef 


(t* O 'I "7 

$21 7 


Pork 


$186 


Other meats 


& A OO 

$132 


Poultry 


tf* *1 Z "7 

$167 


Fish and seafood 


d* a z rr 

$165 


E ggs 


$63 


Dairy products 


$463 


rresn milk ana cream 


q> 1 4o 


Other dairy products 


$315 


Fruits and vegetables 


$989 


Fresh fruits 


$373 


Fresh vegetables 


$294 


Processed fruits 


$171 


Processed vegetables 


$151 


Other food at home 


$1,690 


Sugar and other sweets 


$184 


Fats and oils 


$121 


Miscellaneous foods 


$992 


Nonalcoholic beverages 


$393 


Food away from home 


$2,432 


Alcoholic beverages 


$545 


TOTAL FOOD AND BEVERAGE 
EXPENDITURE 


$7,692 



10 



Figure 1 summarizes the relative annual expenditure per Washington household for food 
and beverages. As a result of the exemptions, the foods potentially requiring labeling 
represent less than 50% of total household food expenditure. 

Figure 1: 

Washington Annual Household Food Expenditure for Foods Requiring Labeling 



Foods Not Requiring 
Labeling 



Alcoholic 

beverages 
7% 



Foods Potentially Requiring 
Labeling 




Milk and Eggs 
3% 




Cereals and 
bakery products 8% 



Other meats 2% 
Other daily 

products 4% 



Fruits and 
vegetables 13% 



Miscellaneous 
foods 13% 

Nonalcoholic 
beverages 5% 
Sweets, Fats, and 
Oils 4% 



11 



Table 3 reports the average annual expenditure by Washington households for the food 
categories that will potentially be required to alter package labeling to disclose genetic 
engineering: 

Table 3: 

Average Annual Household Expenditure in Washington for Products Potentially 

Requiring Package-Label Redesign 



Cereals and cereal products 


$219 


Bakery products 


$423 


Other meats 


$132 


Other dairy products 


$315 


Processed fruits 


$171 


Processed vegetables 


$151 


Sugar and other sweets 


$184 


Fats and oils 


$121 


Miscellaneous foods 


$992 


Nonalcoholic beverages 


$393 


TOTAL 


$3,101 



Assuming that all producers pass on the entire one-time expense of $1,104.43 for label 
redesign, average prices in these food categories would increase — for one year only — 
by 0.14%. If prices increased by 0.14%, Washington households would spend $4.34 
($3,101*0.0014) more for food in these categories for just one year. 36 That translates into an 
expenditure of less than $1.88 per person to offset the one-time expense of redesigning 
labels. 37 

Table 4 reports the average annual household expenditure in Washington on fresh fruits 
and vegetables. Assuming that all food retail stores pass on the entire one-time expense of 
installing "genetically engineered" placards in supermarket produce sections, the price of 
fruits and vegetables would increase by 0.1 % for one year only. If prices increased by 0.1 % 
for one year only, Washington households would spend 67 cents ($667*0.001) more for 
fresh fruits and vegetables, or less than 30 cents per person. 38 



36 This assumes that consumer demand does not change in response to the increase in prices — a reasonable 
assumption given that demand for the entire category of food is inelastic and a 0.03% or 0.1% price increase represents 
a trivial increase in expenditure. 

37 In Washington, the average consumer unit taking part in the Consumer Expenditure Survey is composed of 2.31 
people. 

38 In Washington, the average consumer unit taking part in the Consumer Expenditure Survey is composed of 2.31 
people. 

12 



Table 4: 



Average Annual Household Expenditure in 
Washington for Fresh Fruits and Vegetables 



Fresh fruits 


$373 


Fresh vegetables 


$294 


TOTAL 


$667 



Thus, for the average individual in Washington, total annual food expenditure could 
increase by less than $2.20 — for one year only — as a result of Initiative 522. This 
increase in expenditure would completely offset the average one-time expense that food 
producers incur when they alter their package labeling or display placards to disclose 
genetic engineering. A single annual expenditure of $2.20 represents a trivial, 0.065% 
increase above the current average annual food and beverage expenditure. 

However, this estimate is certain to be an overestimate of the average increase in 
household expenditure for three reasons. First, it assumes that all food producers will 
pass on the entire one-time expense of redesigning labels by increasing prices. However, 
as previously discussed, many consumer prices will not increase to offset the insignificant 
expenses of relabeling and store placards for 2 reasons: 1) food producers routinely 
redesign and reprint labels so the wording required under Initiative 522 can be easily 
incorporated into one of these planned redesigns at zero additional cost and 2) food 
producers will not raise prices to offset the expense of relabeling due to price adjustment 
costs and competitive pressures. 

Second, this estimate is certain to be an overestimate because it assumes that all stores 
will display numerous placards disclosing genetic engineering throughout the produce 
department. In reality, many stores sell few or no genetically-modified fruits and vegetables 
in their produce section. 

Finally, this estimate assumes that all products within these broad food categories will 
require relabeling. In reality, many products within these categories will not require 
relabeling (1) if the producers receive a sworn statement from their supplier that the 
food has not been "knowingly or intentionally" genetically engineered or comingled with 
genetically engineered food, 39 (2) if an independent organization determines that the 
food has not been "knowingly or intentionally" genetically engineered or comingled with 
genetically engineered food, 40 or (3) if the food has been certified to be labeled "organic" 
under federal law. 41 



39 INITIATIVE MEASURE NO. 522 Section 3 (3b) 

40 Id. at Section 3 (3f) 

41 Id. Section 3 (3g) 

13 



II. The Minor Costs of Possible Litigation 



If there is an increase in litigation associated with Initiative 522, it may result in minor costs 
for the State of Washington. The Initiative allows state, local, or private parties to sue for 
violations. The magnitude of these potential litigation costs is unknown, as it depends on 
the number of cases filed, the number of cases prosecuted by state and local governments, 
and how they are adjudicated by the courts. 42 However, it is possible to estimate the costs 
using projections by the Washington Department of Health and existing data on caseloads 
and judicial budgets. 

A. Costs of Attorney General litigation 

Initiative 522 may impose minor additional costs on the State of Washington if the Office 
of the Attorney General (AG) brings actions under Initiative 522 or the office reviews and 
responds to allegations of violations and notices of private action: 'The department, acting 
through the attorney general, may bring an action in a court of competent jurisdiction to 
enjoin any person violating this chapter." 43 However, the AG will likely bring few actions 
under the Act; most actions are likely to be private actions, imposing little cost to the State 
of Washington. Moreover, the cost of the AG reviewing and responding to allegations of 
violations and notices of private action will impose only minimal costs on the state. 

Although it is impossible to estimate the frequency of enforcement actions, the Office of 
Financial Management (OFM) of the State of Washington has projected that there will be 
10 enforcement actions per year under Initiative 522: 

There are potential expenditure impacts for judicial and staff time for superior court filings 
and hearings. Each action constitutes a court filing that will require judge and staff time and 
at least one hearing before a superior court judge. There is no data to predict the number 
of filings, although the Department of Health (DOH) estimates 10 enforcement actions per 
year. Judicial Information System data shows that the majority of these cases are concluded 
after a summary judgment hearing, with a small number of cases proceeding to either bench 
trial or jury trial. 44 

As the AG provides legal services on behalf of the people of Washington, the state incurs 
the costs of any actions brought by the AG under Initiative 522. However, the OFM has 
estimated that the enforcement actions will cost less than $50,000 per year 45 . 

B. Costs of private litigation 

Initiative 522 also allows any private individual to bring an action in a court of competent 
jurisdiction seeking an injunction against persons violating the elements of the bill: "An 
action to enjoin a violation of this chapter may be brought in any court of competent 
jurisdiction by any person in the public interest if the action is commenced more than sixty 
days after the person has given notice of the alleged violation to the department, the 

42 Office of Financial Management, State of Washington, Multiple Agency Fiscal Note Summary 2 (2013), available at 
https://fortress.wa. gov/binaryDisplay.aspx?package=3437 

43 THE INITIATIVE, Section 5(1). 

44 Office of Financial Management, State of Washington, Multiple Agency Fi scal Note Summary 2 (2013), available at 
https://fortress.wa. gov/binaryDisplay.aspx?package=3437 

45 Id. 

14 



attorney general, and to the alleged violator." 46 The state will incur minor additional costs 
to process and hear the additional cases that may result from Initiative 522. 

The number of trials resulting from case filings by Washington citizens will likely be under 
10 trials per year. Prop 65, a consumer disclosure act in California, has resulted in only an 
average of 9 trials a year in the 27 years since it was enacted in a state with a much larger 
population than Washington. Moreover, substantive differences between the bills imply 
substantially more litigation resulting from Prop 65 compared to Initiative 522. 47 

However, even if Washington experienced 10 additional trials per year under Initiative 522, 
the costs would be trivial. Under the Washington State constitution, local jurisdictions pay 
for nearly the entire cost of operating the trial courts. 48 Most of the local jurisdictions will 
see no increase in the number of trials under Initiative 522, and at most, 10 counties may 
expect one additional trial. However, one additional trial will impose negligible costs on 
local jurisdictions. For example, in 2012 there were 445 trials in Thurston County Superior 
Court, the court at the seat of state government. 49 The annual funding for the Thurston 
County Superior Court in 2012 was $5,762,844. 50 Thus, the per-trial cost of operating the 
court was approximately $12,950. Assuming this per-trial cost for each of the additional 
trials under Initiative 522, the 10 additional cases would only cost Washington $129,500. 
This estimate is certain to be an overestimate of the average per-trial cost because many 
of the costs of operating the trial courts are fixed (not changing as the number of cases 
changes), so that an additional case will only increase the variable costs. 

C. Total costs of increases in litigation 

Thus, OFM has estimated that brought by the AG under Initiative 522 will cost less than 
$50,000 per year. Private litigation is projected to cost less than $129,500 per year. Thus, 
the total costs of increased litigation under Initiative 522 are expected to be less than 
$179,500 annually. In per capita terms, an additional $179,500 translates into a cost of 
$0,026, or approximately 3 cents for each person living in the State of Washington. 

III. Negligible Administrative Costs 

Initiative 522 may also impose administrative costs on Washington State, as the 
Department of Health (DOH) adopts regulations necessary to implement certain provisions 
in the measure. For example, the DOH will have to develop a new program to regulate 
the labeling requirement and regulations specifying the sampling and testing procedures 
necessary to determine whether foods contain genetically engineered ingredients. 51 

46~~ THE INITIATIVE, Section 5(3). 

47 For a discussion, see Joanna Shepherd-Bailey, Economic Assessment: Proposed California Right To Know Genetically 
Engineered Food Act (Prop 37) Likely To Cause No Change in Food Prices and Negligible Litigation and Administrative Costs 
(201 2), available at: http://www.anh-usa.org/wp-content/uploads/201 2/08/GE-Food-Act-Costs-Assessment.pdf 

48 Board for Justice Administration, Washington Courts: Consequences of Inadequate Funding 3 (2010), available at: 
http://www.courts.wa.gov/JusticelnJeopardy/documents/FundingSurvey.pdf 

49 Washington Courts, Superior Courts, Trial Proceedings by Type of Case - 201 2 Annual Report (201 2), available at: 
http://www.courts.wa. gov/caseload/?fa=caseload.showReport&level=s&freq=a&tab=&file I D=trlyr 

50 Thurston County 2013 Budget 43 (2013), available at: http://www.co.thurston.wa.us/Budget/201 3/201 3-budget- 
policy-level-requests.pdf 

51 Office of Financial Management, State of Washington, Multiple Agency Fi scal Note Summary (2013), available at 
https://fortress.wa. gov/binaryDisplay.aspx?package=3437 

15 



Initiative 522 does not specify the precise responsibilities the DOH will have under the Act: 

Sec. 4. The department may adopt rules necessary to implement this chapter, provided 
that the department is not authorized to create any exemptions beyond those provided 
in section 3(3) of this act. 52 

Nevertheless, the Office of Financial Management (OFM) of the State of Washington has 
estimated various administrative costs likely to result from Initiative 522. 

State Expenditure and Cost Assumptions 

DOH program development will include expenditures for rule making, inspection and 
compliance, as well as education and technical assistance to the food industry. The cost 
of these expenditures over six fiscal years is estimated at $2,168,000. Beginning July 1, 
2015, DOH will contract with a private laboratory for product sampling and testing as 
required in Initiative. Total cost of this expenditure over six fiscal years is estimated at 
$1,200,000. The following table shows DOH estimated costs by fiscal year: 53 



Fiscal Year 


2014 


2015 


2016 


2017 


2018 


2019 


COSTS 


Program 
Development 


$82,000 


$96,000 


$210,000 


$210,000 


$210,000 


$210,000 


$1,018,000 


Rule 

Development 


$96,000 


$122,000 


$0 


$0 


$0 


$0 


$218,000 


Compliance and 
Enforcement 


$0 


$0 


$239,000 


$231,000 


$231,000 


$231,000 


$932,000 


Laboratory 
Sampling and 
Testing 


$0 


$0 


$300,000 


$300,000 


$300,000 


$300,000 


$1,200,000 


TOTAL 


$178,000 


$218,000 


$749,000 


$741,000 


$741,000 


$741,000 


$3,368,000 



Based on these figures, the average annual cost of Initiative 522 to the Department of 
Health is $561,333, and OFM has projected that the annual cost will stabilize around 
$741 ,000 for future years. 

These costs will have an insignificant impact on the Washington budget. Table 5 reports 
the total annual budget for the State of Washington and the total budget for DOH in 
2013. It also reports the trivial impact of $741,000 in additional administrative costs on the 
State of Washington. The annual DOH budget in 2013 is $475,526,500; thus an additional 
$741,000 resulting from Initiative 522 will increase DOH expenditures by only 0.156%~well 
under a 1 % increase. 54 The total state budget in 201 3 is approximately $1 6 billion; thus an 
additional $741,000 resulting from Initiative 522 will increase total state expenditures by 
only 0.0045%. 55 



52 THE INITIATIVE, Section 4. 

53 Office of Financial Management, State of Washington, Fiscal Impact Statement for Initiative 522 (2013), available at 
http://www.ofm.wa.gov/ballot/2013/l-522.pdf 

54 The biennium budget for the DOH is $ 951 ,053,000, so the annual budget is $475,526,500. Office of Financial 
Management, State of Washington, 2013-2015 Operating Budget, 3ESSB 5034 as enacted 98 (2013), available at: http:// 
apps.leg.wa.gov/documents/billdocs/2013-14/Pdf/Bills/Session%20Laws/Senate/5034-S.SL.pdf 

55 The biennium budget is $32,796,100,000, so the annual budget is $16,398,050,000. House and Senate Fiscal 
Committees and Office of Financial Management, State of Washington, 201 1 -201 3 with Enacted Supplementals and 201 3-201 5 
Enacted Budget, Balance Sheet (2013), available at: http://www.ofm.wa.gov/budget/info/currentbalance.pdf 



16 



Table 5: 



Washington Budget and Impact of $741,000 
Administrative Costs of Initiative 522 



Annual Diin/iat 

Hnnudi Duuyci 


£.\J I O 


Total Annual Budget 


$16,398,050,000 


Increase in Total Budget 

r^Qiiltinn frr>m $741 000 

administrative costs of 
Initiative 522 


0.0045% 


DOH Annual Budget 


$ 475,526,500 


Increase in DOH budget 
resulting from $741,000 
administrative costs of 
Initiative 522 


0.156% 



In sum, if Initiative 522 imposes annual administrative costs of $741,000 (as OFM projects), 
the impact on Washington State would be trivial; DOH expenditures would increase by only 
0.156% and total state expenditures would increase by only 0.0045%. In per capita terms, 
an additional $741,000 translates into a cost of $0,104, or approximately 11 cents for each 
person living in the State of Washington. 



17 



About the Author 



Joanna Shepherd-Bailey, Ph.D., received her doctorate in Economics from Emory 
University, with concentrations in Econometrics/Statistics and Law & Economics. She 
is currently a tenured professor at Emory University School of Law, and was previously 
a professor of Economics at Emory University, Clemson University and Georgia State 
University. She previously worked on the Economic Research Team at the Atlanta Federal 
Reserve Bank. Professor Shepherd-Bailey has taught numerous courses in statistics, 
econometrics, economics, and other analytical courses to undergraduates, Ph.D. students, 
and law students. She has published numerous empirical articles that have appeared in 
leading peer-reviewed economics journals, peer-reviewed law journals, and law reviews. 
The majority of these articles involved a detailed statistical analysis of legal changes or 
legal institutions. She has testified about her statistical work before the U.S. House of 
Representatives' Judiciary Committee and the National Academy of Sciences. 



20 



Appendix 1: 
Product Availability across Food Retail Stores 



/wanaoie in 

rclLclll Ul JIUIcb. 


rclLclll Ul 1 1 UU UL Lb 


0% tn 1 o% 

U /O lO I U /O 


1 4% 

I *+ /o 


1 o% to ?o% 


11% 

I I /o 


?n% to *30% 

^.U /O lO JU /O 


A% 

O /O 


30% to 40% 


s% 


40% to 50% 


5% 


50% to 60% 


6% 


60% to 70% 


7% 


70% to 80% 


9% 


80% to 90% 


11% 


90% to 99% 


12% 


99% to 100% 


13% 



Appendix 2: 

Number of Food Retailers selling Food Products 
in Washington; U.S. Census Bureau 57 



Year 


NAICS 
Code 


Food Retailer 


Number of 
Establishments 
selling Groceries 


Sales of Groceries 


2007 


44511 


Grocery Stores 


2,029 


$ 8,404,594,000 


2007 


4452 


Specialty Food Stores 


630 


$ 346,359,000 


2007 


4453 


Beer, wine and liquor 
stores 


23 


$2,601,000 


2007 


446 


Health and Personal 


575 


$ 136,199,000 


2007 


447 


Gasoline Stations 


1,824 


$563,021,000 


2007 


452 


General Merchandise 


518 


$ 4,204,405,000 



56 Reproduced from Steven Tenn & John Yun, Biases in Demand Analysis Due to Variation in Retail Distribution, 
FTC Bureau of Economics Working Paper No. 287 (2007), available at: http://www.ftc.gov/be/workpapers/wp287.pdf 

57 U.S. Census Bureau, Retail Trade: Subject Series - Product Lines: Product Lines Statistics by Kind of Business 
for the United States and States (2007), available at: http://factfinder2.census.gov/faces/nav/jsf/pages/searchresults. 
xhtml?refresh=t 



21 



Appendix 3: 

CURRICULUM VITAE 
2013 

JOANNA SHEPHERD BAILEY 

Emory University School of Law 
Atlanta, GA 30322-2770 
404-606-2857 
jshepherdbailey@law.emory.edu 

ACADEMIC EMPLOYMENT: 

Associate Professor of Law with Tenure, Emory University School of Law, Fall 2010 - present 

Associate Professor of Law, Emory University School of Law, Fall 2008 - Fall 2010 

Assistant Professor of Law, Emory University School of Law, Fall 2005 - Fall 2008 

Visiting Assistant Professor, Emory University University, Department of Economics, 2004-2005. 

Assistant Professor of Economics, Clemson University, 2002 - 2004. 

Visiting Assistant Professor, Georgia State University, Department of Economics, 2002. 

Instructor, Emory University, Department of Economics, 2000 - 2002. 

Macroeconomic Research Team, Federal Reserve Bank, Atlanta, GA, 1998 - 1999. 

PUBLICATIONS: 
Major Articles 

• Uncovering the Silent Victims of the American Medical Liability System, 67 Vanderbilt Law Review (forthcoming, 
2014) 

• The Partisan Foundations of Judicial Campaign Finance, with Michael Kang, 86 Southern California Law Review 
(forthcoming, 2014) 

• Products Liability and Economic Activity: An Empirical Analysis of Tort Reform's Impact on Businesses, 
Employment, and Production, 66 Vanderbilt Law Review 257 (201 3) 

• The Partisan Price of Justice: An Empirical Analysis of Campaign Contributions and Judicial Decisions, with 
Michael Kang, 86 New York University Law Review 69 (201 1 ). 

• Measuring Maximizing Judges: Empirical Legal Studies, Public Choice Theory, and Judicial Behavior, 201 1 
University of Illinois Law Review 101 (2011). 

• Legislatures, Judges, and Parole Boards: The Allocation of Discretion Under Determinate Sentencing, with Nuno 
Garoupa and Dhammika Dharmapala, 62 Florida Law Review 1037 (2010). 

• Are Appointed Judges Strategic Too? 58 Duke Law Journal 1 589 (2009). 

• Money Politics, and Impartial Justice, 58 Duke Law Journal 623 (2009). 

• The Influence of Retention Politics on Judges' Voting, 38 The Journal of Legal Studies 169 (2009). 

22 



• Tort Reform's Winners and Losers: The Competing Effects of Care and Activity Levels, 55 UCLA Law Review 905 
(2008). 

reprinted in Tort Reform: Essays, Narratives, and Other Materials (2010, forthcoming) 

• What Else Matters for Corporate Governance?: The Case of Bank Monitoring, with Frederick Tung and Albert 
Yoon, 88 Boston University Law Review 991 (2008). 

• Blakely's Silver Lining: Sentencing Guidelines, Judicial Discretion, and Crime 58 Hastings Law Journal 533 (2007). 

• Tort Reform and Accidental Deaths, with Paul H. Rubin. 50 The Journal of Law & Economics 221 (2007). 

• reprinted in Roundtable Viewpoints: Business Law (2008) 

• subject of Op-Ed, Tort Reform Saves Lives, Wall Street Journal by Rubin, Oct. 8, 2005. 

• Deterrence versus Brutalization: Capital Punishment's Differing Impacts Among States, 104 Michigan Law Review 
203 (2005). 

• Featured in front page article: Adam Liptak, Does Death Penalty Save Lives? A New Debate, The New York 
Times, November 18, 2007. 

• subject of Op-Ed, Why Not All Executions Deter Murder, The Christian Science Monitor, Dec. 14, 2005. 

• An Empirical Study of Public Defender Effectiveness: Self-Selection by the "Marginally Indigent," with Judge 
Morris B. Hoffman and Paul H. Rubin. 3 Ohio State Journal of Criminal Law 223 (2005). 

• subject of Op-Ed, Free-Market Justice, The New York Times, 
by Hoffman, Jan. 8, 2007. 

• Murders of Passion, Execution Delays, and the Deterrence of Capital Punishment, 33 The Journal of Legal 
Studies 283 (2004). 

• Does Capital Punishment Have a Deterrent Effect? New Evidence from Postmoratorium Panel Data, with Paul 
Rubin and Hashem Dezhbakhsh. 5 American Law and Economics Review 344 (2003) 

• reprinted in Bezpieczne Panstwo. Nowe trendy w polityce karn (2006). 

• reprinted in Economics, Law and Individual Rights (2008) 

• Police, Prosecutors, Criminals, and Determinate Sentencing: The Truth about Truth-in-Sentencing Laws, 45 The 
Journal of Law & Economics 505 (2002). 

• Fear of the First Strike: The Full Deterrent Effect of California's Two- and Three-Strikes Legislation, 31 The 
Journal of Legal Studies 1 59 (2002). 

• reprinted in Bezpieczne Panstwo. Nowe trendy w polityce karnej (2006) 



Books 

• Economic Analysis For Lawyers, with Henry N. Butler and Christopher Drahozal (forthcoming 2013) 

• The Economics of Industrial Organization, with William G. Shepherd (2003). 
Essays and Book Chapters 

• Combatting the Prescription Painkiller Epidemic: A National Prescription Drug Reporting Program, 40 American 
Journal of Law and Medicine (forthcoming 2014) 

• Justice at Risk: An Empirical Analysis of Campaign Contributions and Judicial Decisions, American Constitution 
Society for Law and Policy (2013) 

• Is More Information Always Better? Mandatory Disclosure Regulations in the Prescription Drug Market, 99 
Cornell Law Review Online (forthcoming 2013) 

• The Fox Guarding the Henhouse: The Regulation of Pharmacy Benefit Managers by a Market Adversary, 

23 



Northwestern Journal of Law and Social Policy (forthcoming 2013) 

• Law and Economics, with Paul H. Rubin in The International Encyclopedia of Social and Behavioral Sciences 

(James Wright ed., forthcoming 2013) 

• Public Choice and the Law, with Paul H. Rubin in The Elgar Companion to Public Choice (Michael Reksulak, 

Lauralliam F. Shughart II eds., forthcoming 2013) 

• Lawyers, Ignorance, and the Dominance of Delaware Corporate Law, with William Carney and George 
Shepherd, 2 Harvard Business Law Review 123 (2012) 

• Baseball's Accidental Racism: The Draft, African-American Players, and the Law, with George Shepherd, 44 
Connecticut Law Review 1 97 (201 1 ) 

• Diversity, Tenure, and Dissent, Legal Workshop ( Duke Law Journal , 2010) 

• Elected Judges as Politicians, Legal Workshop ( Duke Law Journal, 2010) 

• Judicial Opposition as Politics, 166 Journal of Institutional and Theoretical Economics 88 (2010). 

• The Economics of Capital Punishment, in Criminal Law and Economics 207 (Nuno Garoupa ed., 2010) 

• Delaware Corporate Law: Failing Law, Failing Markets, with William J. Carney & George B. Shepherd in The Law 
and Economics of Corporate Governance: Changing Perspectives (Alessio M. Pacces, ed., 2010, forthcoming) 

• The Demographics of Tort Reform, with Paul H. Rubin. 4 The Review of Law & Economics 591 (2008). 

• The Economics of Crime, with Erling Eide and Paul H. Rubin, 2 Foundations and Trends in Microeconomics 291 
(2006). 

• The Relationship between Prison Populations and Crime: Causes and Impacts, 5 Criminology and Public Policy 
285 (2006). 

• The Deterrent Effect of Capital Punishment: Evidence from a Judicial Experiment, with Hashem Dezhbakhsh, 44 
Economic Inquiry 51 2 (2004). 

• Antitrust and Market Dominance, with William G. Shepherd and George B. Shepherd, 46 The Antitrust Bulletin 
835 (2002). 



CONGRESSIONAL TESTIMONY: 

• Testimony on Crime and Deterrence: Hearing on H.R. 2934, The Terrorist Penalties Enhancement Act of 2003. 
Before the House Judiciary Committee; Subcommittee on Crime, Terrorism, and Homeland Security, 108 th 
Cong. (2004). 



EDUCATION: 

• Emory University, Atlanta, GA, Ph.D. in Economics; Fields of Specialization: Law & Economics & Econometrics/ 
Statistics (study at Emory School of Law), 2002. Woodruff Scholar. 

• Baylor University, Waco, TX, BBA in Economics and International Business, 1997 (GPA: 4.0; Summa Cum Laude) 
TEACHING EXPERIENCE: 

• Torts; Law and Economics; Analytical Methods for Lawyers; Statistics for Lawyers; Economics and Public Policy; 
Econometrics; Statistics; Accounting for Lawyers, Finance for Lawyers, Advanced Microeconomics; Introduction 
to Microeconomics 



24 



UNIVERSITY SERVICE: 



• Chair of Faculty Admissions Committee (201 2-present) 

• Chair of Colloquium and Scholarship Committee (201 1 -201 2) 

• Admissions Committee (2009-present) 

• University-Wide Liberal Arts Committee (201 1 -present) 

• Woodruff Scholar Selection Committee (2010-present) 

• Appointments Committee (201 0-201 1 ) 

• Curriculum Committee (2007-2010) 

• Colloquium and Scholarship Committee (2006-2007) 

• Academic Standings Committee (2005-2006) 

SELECTED SCHOLARLY PRESENTATIONS: 
University Presentations 

• University of Chicago Law School, Conference on Judicial Behavior (2013) 

Panel Effects in State Courts 

• Korea Economic Research Institute (2013) 

Overcriminalization in U.S. Corporate Law 

• University of Texas School of Law, Center for Law, Business, and Economics (2012) 

The Partisan Foundations of Judicial Campaign Finance 

• ETH Zurich, the University of Zurich, the University of St. Gallen and the University of Lucerne (Joint workshop). 
Workshop & Lecture Series in Law & Economics, Zurich, Switzerland (2012) 

Products Liability and Economic Activity 

Partisan Differences: How and Why Democratic and Republican Judges Differ in Party Loyalty 

• George Mason School of Law, Law & Economics Colloquium (2012) 

Products Liability and Economic Activity 

• University of Chicago Law School, Law & Economics Faculty Workshop (201 1) 

Products Liability and Economic Activity 

• University of Texas School of Law, Center for Law, Business, and Economics (201 1 ) 

Products Liability and Economic Activity 

• Northwestern University School of Law, Searle Center Policy Roundtable (2010) 

Offer-of-Judgment Rules and Civil Litigation 

• Economics Institute of the Academy of Sciences of the Czech Republic and Charles University Dept. of 
Economics, Prague (2010) 

The Partisan Price of Justice 

• University of Illinois College of Law, Conference to Honor Tom Ulen (2010) 

Measuring Maximizing Judges 

• George Mason Robert A. Levy Fellows Workshop in Law & Liberty (2010) 

The Partisan Price of Justice 

• University of Chicago Law School, Law & Economics Faculty Workshop (2009) 

The Business of Judicial Elections 

• Northwestern University School of Law, Law & Political Economy Colloquium (2009) 

The Business of Judicial Elections 

• Georgetown University Law School, Law & Economics Faculty Workshop (2009) 

The Business of Judicial Elections 

• Northwestern University School of Law, Judicial Behavior Workshop (2009) 
Are Appointed Judges Strategic Too? 

• Duke Law School, Workshop on Judicial Behavior (2009) 
Are Appointed Judges Strategic Too? 

• University of Southern California School of Law, CLEO Faculty Workshop (2007) 

The Influence of Retention Politics on Judges' Decisions 

• University of North Carolina School of Law, Faculty Colloquium (2007) 

The Influence of Retention Politics on Judges' Decisions 

• NYU School of Law, Comparative Law & Economics Forum (2007) 

The Influence of Retention Politics on Judges' Decisions 

• University of Michigan School of Law, Law & Econ Colloquium (2007) 

The Demographics of Tort Reform 

• Northwestern University School of Law, Law & Econ Colloquium (2006) 

The Demographics of Tort Reform 



25 



• Florida State University School of Law, Law & Econ Colloquium (2006) 

Cross-Monitoring and Corporate Governance 

• Stanford Law School, Law & Econ Colloquium (2006) 

Tort Reform and Accidental Deaths 

• Univ. of Illinois College of Law, Comparative Law & Economics Forum (2005) 

Tort Reform and Accidental Deaths 

• George Mason University, Law & Econ Colloquium (2005) 

Tort Reform and Accidental Deaths 

• University of Georgia, Law & Econ Colloquium (2005) 

Deterrence versus Brutalization: Capital Punishment's Differing Impacts Among States 

• University of Alabama, Department of Economics Faculty Colloquium (2004) 

Diversity, Segregation, and Crime: An Industrial Organization Analysis of Competition 

• University of Toronto School of Law, Law & Economics Colloquium (2004) 

Deterrence versus Brutalization: Capital Punishment's Differing Impacts Among States 

• Georgetown University Law School, Olin Law & Economics Workshop (2004) 

Capital Punishment and Deterrence: Evidence from a Judicial Experiment 

• Georgia Tech University, Department of Economics Faculty Colloquium (2001) 

Police, Prosecutors, Criminals, and Determinate Sentencing 

Conferences and Meetings 

• Korean Law and Economics Association, Seoul, Korea (2013) 

Panel Effects on State Courts 

• American Law & Economics Association Annual Meetings, Nashville, TN (2013) 

The Partisan Foundations of Judicial Campaign Finance 

• Canadian Law & Economics Association Annual Meetings, Toronto, CA (2012) 

The Partisan Foundations of Judicial Campaign Finance 

• American Law & Economics Association Annual Meetings, Palo Alto, CA (2012) 

Products Liability and Economic Activity 

• American Law & Economics Association Annual Meetings, New York, NY (201 1) 

The Partisan Price of Justice 

• Mason Judicial Education Program 6th Annual Judicial Symposium on Civil Justice Issues, Fairfax, VA (201 1) 

Ideal versus Reality in Third-Party Litigation Financing 

• Global Conference on Third-Party Financing of Litigation hosted by the Searle Civil Justice Institute, Brussels, 
Belgium (2011) 

Ideal versus Reality in Third-Party Litigation Financing 

• Global Conference on Third-Party Financing of Litigation hosted by the Searle Civil Justice Institute, New York, 
NY (2011) 

Ideal versus Reality in Third-Party Litigation Financing 

• Southeastern Association of Law Schools Annual Meetings, Hilton Head, SC (201 1) 

Teaching Empirical Methods to Law Students 

• American Law & Economics Association Annual Meetings, Princeton, NJ (2010) 

The Business of Judicial Elections 

• American Law & Economics Association Annual Meetings, San Diego, CA (2009) 

Are Appointed Judges Strategic Too? 

• Conference on New Institutional Economics, Max Planck Institute, Germany (2009) 

Judicial Opposition as Politics 

• Conference on Empirical Legal Studies, New York, NY (2007) 

Tort Reform's Unintended Consequences 

• American Law & Economics Association Annual Meetings, Boston, MA (2007) 

The Demographics of Tort Reform 

• European Association of Law and Economics Annual Conference, Madrid (2007) 

The Demographics of Tort Reform 

• Law and Society Association Annual Meetings, Baltimore, MD (2006) 

Cross-Monitoring and Corporate Governance 

• Canadian Law and Economics Association An nual Meetings, Toronto, CA (2006) 

Cross-Monitoring and Corporate Governance 

• American Law & Economics Assoc. Annual Meetings, New York, NY (2005) 

Blakely's Silver Lining: Sentencing Guidelines, Judicial Discretion, and Crime 

• American Economics Association Annual Meetings, Washington, D.C. (2005) 

Blakely's Silver Lining: Sentencing Guidelines, Judicial Discretion, and Crime 



26 



• National Academy of Sciences, National Research Council Semi-Annual Meeting, Washington, D.C. (2004) 

Capital Punishment and Deterrence 

• American Law & Economics Assoc. Annual Meetings, New York, NY (2005) 

Deterrence versus Brutalization: Capital Punishment's Differing Impacts Among States 

• American Law & Economics Assoc. Annual Meetings, Chicago, IL (2004) 

Capital Punishment and Deterrence 

• American Law & Economics Assoc. Annual Meetings, Toronto, CA (2003) 

Major League Baseball, Market Regulations, and the Export of Employment 

• American Law & Economics Assoc. Annual Meetings, Washington, D.C. (2001) 

The Deterrent Effect of California's Two- and Three-Strikes Legislation 



OTHER PROFESSIONAL ACTIVITIES: 

• Associate Editor of the International Review of Law & Economics (201 1- present) 

• Peer-Reviewer (Referee) for: Journal of Legal Studies, Journal of Law, Economics and Organization, American 

Political Science Review, Pubic Choice, Journal of Empirical Legal Studies, Journal of Health Economics, Review 
of Law & Economics, International Review of Law & Economics, Supreme Court Economic Review, Economica, 
Journal of Industrial Organization, Managerial & Decision Economics, Contemporary Economic Policy, Public 
Finance Review. 

• Statistical Expert in the Areas of Damage Computation, Employment Law, Healthcare Law, and Competition 

Policy 

• Other Professional Recognition for my research includes: 

• Television interviews on CNN Sunday; National Fox News; The O'Reilly Factor on the National Fox News 
Network; and CBS, ABC, and FOX local affiliates. 

• Op-Eds in The Wall Street Journal, The New York Times, and The Christian Science Monitor. 

• Print interviews include the The New York Times, Chronicle of Higher Education, The Atlanta Business 
Chronicle, The Washington Post. 

Radio interviews include ReachMD, BBC: Five Alive; WJR in Detroit, Ml; KRLD in Arlington, TX; WLW in 
Cincinnati, OH; KTSA in San Antonio, TX; CHED in Edmonton, Canada; WRVA in Richmond, VA; CJME in 
Saskatoon, Canada; NTR in Saskatoon, Canada; WMVZ in Detroit, Ml; KXNT in Las Vegas, NV; and KRLA in 
Los Angeles, CA. 

• Research also cited in the National Center for Policy Analysis: Executive Alert; The Weekly Standard; and 
The National Journal. 

• Research also requested for use by the Senate Judiciary Committee; U.S. Naval Academy; House of 
Representatives (Rep. Bob Goodlatt); Attorney General of Alabama; New York State Assembly (Stephen 
Kaufman); and the Chief of Criminal Appeals Division of Chicago (Renee Goldfarb). 



27 



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